Royal Dutch Shell plc (ADR) (NYSE:RDS.A) News Analysis: Shell Cuts Back On Sichuan Shale Gas Project Venture

Published: September 6, 2014 at 9:14 am EST

By: Micheal Kaufman

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Royal Dutch Shell plc (ADR) (RDS.A) announced that it plans on cutting down investment in the shale gas project it signed up for in China’s Sichuan province. The company made the decision due to geological challenges, and dense population in the area.

The Anglo-Dutch oil giant signed the agreement with the government of China in March, to help the country meet its growing energy demand by investing in major projects.

Shell agreed on exploring shale gas projects in the Sichuan Basin in collaboration with China National Petroleum Corporation. Though Shell did not disclose the amount it would invest in the project, it stated that it would spend $1 billion every year in developing China’s shale gas reserves.

In September last year, the project agreement between the state-owned China National Petroleum Corporation and Qatar Petroleum came to a standstill. Ever since the suspension of the agreement, analysts have raised concerns over the success of Shell working with the Chinese oil giant.

Progress in the Sichuan Basin proved to be harder than Shell had initially expected; the company is finding it difficult to operate in the geologically challenging and highly populated agricultural region. Thus, it plans on cutting down the level of operational activities it initially planned.

via Royal Dutch Shell plc (ADR) (NYSE:RDS.A) News Analysis: Shell Cuts Back On Sichuan Shale Gas Project Venture.